Waydao
Returning Member

Seniors and students

If I pay CRA tax on UK pensions am I eligible for the Canada tax-free allowance?

Seniors and students

If you are referring to the up to $2000 Pension credit, yes foreign pensions including UK pensions are eligible amounts toward this credit. They are also eligible for Pension Splitting.

 

Waydao
Returning Member

Seniors and students

Sorry not to be clear Tony - and actually I don't know what the Pension Credit is!

 

I assume the pension income is taxed as income and I saw these two points online after a google search - no website for context or source. There are about the Tax Free Allowance and wondered about my situation when I return to Canada after many years in the UK. Most of my income will be UK pensions:

 

"Basically, you are allowed earn up to $12,069 tax free in the tax year if 90% or more of your total income was sourced in Canada"

 

"The tax-free allowance in Canada has been increased. Here's what you need to know. The basic personal tax-free allowance has been increased by $579 from $13229 to $13,808 in 2021. This means you can earn up to this amount without paying federal tax on your income"

Seniors and students

It is referred to as Personal Amount by CRA and has a 2021 value of $13229, rising to $15000 in 2 years.

If you are Resident in Canada for tax purposes you get this credit, regardless of any pension, foreign or local.

Seniors and students

If you are referring to the up to $2000 Pension credit, yes foreign pensions including UK pensions are eligible amounts toward this credit. They are also eligible for Pension Splitting.

 

Seniors and students

yes you can, Turbotax will do this for you

Seniors and students

Yes, Foreign pension amounts are considered when calculating the Pension Credit. 
Bear in mind  maximum credit is only $2000.00

This is a trifling amount unchanged since 2006. Complain.

also this buys you only $300 maximum federal tax paid,, and it is none-refundable.

Seniors and students

When I lived in the UK, I set up a Personal Pension for my young daughter. We then moved to Canada and she is now an adult. The pension is not huge, but it is growing. Of course she cannot access it until she is 55. So how is it meant to be treated by Revenue Canada now? Does she say nothing and then report when she draws it out at 55, or does it have to be reported annually?

Seniors and students

What if you are a dual resident and the funds from your UK State Pension stay in the UK? Does it make more sense just to include them as part of you general UK income?

 

Seniors and students

Residence and citizenship aren’t the same. As I am, you can have dual citizenship, but essentially you must be resident in on place at a time for tax purposes.

If you are attempting to maintain UK residence in order to avail yourself of pension increases, you should expect to include this amount in your UK income and pay UK accordingly.The amount would be reportable on any return to CRA but under treaty would be exempt from tax in Canada.